Penny Ice Creamery offering health insurance to employees

SANTA CRUZ -- McDonald's and Jack in the Box got waivers to avoid incurring millions more for employee health care expenses, but Zachary Davis and Kendra Baker decided to go in a different direction.

With their commitment to sustainability, specializing in organic dairy and sustainably grown ingredients, the owners of The Penny Ice Creamery downtown wanted to offer their employees health insurance.

And now they have -- a year ahead of the mandate in the Affordable Care Act.

It's a singular accomplishment for a new business (3 years old in August), a small business (currently 35 employees split among three locations, more in the summer) and a food-service business (which typically offer employees meals but not health coverage).

"We were working on it almost two years," Davis said, noting the appeal of the law, upheld in late June by the Supreme Court, was a hindrance. "After that decision came down, things were looking more clear."

He learned from Small Business Majority, a national nonprofit he had worked with, about a tax credit available to businesses with fewer than 25 full-time equivalent employees paying an average of less than $50,000 a year and paying at least half of the employee health insurance premiums.

"I wasn't aware it existed," Davis said. "With a small business like ours, it can be hard to know what applies to you."

Davis said he and Baker tried to figure out insurance on their own, looking at plans and talking to agents, but found the terminology hard to comprehend.

They made progress after getting a referral to local insurance broker Drew Miller, who has an office downtown and came by with his iPad to go over information.

"He was extremely helpful," said Evan Van Valkenberg, 27, general manager for the business, who took on the research job that took a couple of months. "We had countless conversations about the pros and cons of plans."

One challenge was to figure out what would work for a wide array of employees, from young people working part time in their first or second job, often covered by their parents' insurance, to full-time workers making a career in food service.

Another was to offer insurance that was comprehensive yet affordable.

To get answers, the owners turned to their employees.

Davis said, "We sat down with the staff and asked, 'How valuable is this to you? At what point does it not make sense?' "

He added, "We would love to cover the entire cost but we can't do that," so employees kick in $40 to $50 a month.

Another decision was to offer dental and vision coverage, options chosen by quite a few employees.

There is a $1,500 deductible, which is "reasonable for the level of coverage," Van Valkenberg said, noting some deductibles go up to $5,000 or $7,500.

Having health insurance with a job is a benefit employees appreciate.

"I've never had it before," said pastry chef Anna St. John, 24. "I'm excited about going to a doctor who knows me."

For pastry assistant Linda Gonzalez, 28, it's comforting to know a visit to a doctor or dentist will not be so expensive.

"They value us," she said of her employers.

"Groups are going to higher deductible plans," said Eileen Russell of Drew Miller Insurance. "It was $500, and now it's $1,500 to $3,000."

Starting in 2014, health insurance will be available through "exchanges," where individuals and small businesses will be able to compare health plans, get answers to questions and find out if they are eligible for tax credits. The costs of those plans have yet to be determined.

"We probably won't know anything until mid-2013 (about) what will happen for January 2014," Russell said.